Report to the european securities committee and to the European Parliament on convergence between International Financial Reporting Standards (IFRS) and third country national Generally Accepted Accounting Principles (GAAPs) SEC(2010)681 final
Date: 2010-06-04
Institutions: European Commission
Subjects: accounting, capital market, domestic market, international standard, standardised accounting system, third country

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EUROPEAN COMMISSION 

Brussels, 4.6.2010 
COM(2010)292 final 

REPORT TO THE EUROPEAN SECURITIES COMMITTEE AND TO THE 
EUROPEAN PARLIAMENT 

on convergence between International Financial Reporting Standards (IFRS) and third 
country national Generally Accepted Accounting Principles (GAAPs) 

SEC(2010)681 final 

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REPORT TO THE EUROPEAN SECURITIES COMMITTEE AND TO THE 
EUROPEAN PARLIAMENT 

on convergence between International Financial Reporting Standards (IFRS) and third 
country national Generally Accepted Accounting Principles (GAAPs) 

1. 

INTRODUCTION AND LEGAL BASES 

Since 1 January 2005, companies listed on a regulated market of any EU Member State have 
to use IFRS as adopted by the EU for preparing their consolidated financial statements.1 The 
Prospectus  Regulation2  and  the  Transparency  Directive3  extend  the  requirement  to  produce 
financial reports either on the basis of IFRS or on the basis of certain third countries national 
accounting standards equivalent to those standards, to third country issuers making a public 
offer of securities in the EU and those whose securities are traded on an EU regulated market. 

In December 2007, the Commission established a mechanism4 to determine the equivalence 
of Generally Accepted Accounting Principles (GAAPs). In December 2008, the Commission 
adopted  a  Decision5  and  a  Regulation,6  which  identified  as  equivalent  to  IFRS  the  US 
GAAPs,  and  Japanese  GAAPs,  and  accepted  financial  statements  using  GAAPs  of  China, 
Canada,  India,  South  Korea  within  the  EU  on  a  temporary  basis,  until  no  later  than  31 
December 2011.  

In this context, the EU legislation7 requires the European Commission to update the European 
Securities  Committee  (ESC)  and  the  European  Parliament  (EP)  at  regular  intervals  on  the 
progress that is being made by these countries with their respective programmes.  

In  the  first  report  of  July  2007  the  Commission  reported  on  the  respective  timetables 
envisaged  by  national  authorities  of  certain  third  countries  for  converging  their  national 
GAAPs  towards  IFRS.8  In  the  second  report  of  April  2008  the  Commission  examined  the 

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Regulation  (EC)  No  1606/2002  of  the  European  Parliament  and  of  the  Council  of  19  July  2002  (the 
"IAS Regulation") 
Commission  Regulation  (EC)  No  809/2004  of  29  April  2004  (the  "Prospectus  Regulation").  This 
Regulation  implements  Directive  2003/71/EC  of  the  European  Parliament  and  of  the  Council  of  4 
November 2003 (the "Prospectus Directive"). 
Directive  2004/109/EC  of  the  European  Parliament  and  of  the  Council  of  15  December  2004  (the 
"Transparency Directive"). 
Commission  Regulation  (EC)  No  1569/2007  of  21  December  2007  establishing  a  mechanism  for  the 
determination  of  equivalence  of  accounting  standards  applied  by  third  country  issuers  of  securities 
pursuant  to  Directives  2003/71/EC  and  2004/109/EC  of  the  European  Parliament  and  of  the  Council 
(the "Equivalence Mechanism Regulation"). 
Commission  Decision  2008/961/EC  of  12  December  2008  on  the  use  of  third  countries´  issuers  of 
securities of certain third country's national accounting standards and International Financial Reporting 
Standards to prepare their consolidated financial statements, OJ L 340, 19.12.2008, p. 112 
Commission  Regulation  (EC)  No  1289/2008  of  December  2008  amending  Commission  Regulation 
(EC) No 809/2004 implementing Directive 2003/71/EC of the European Parliament and of the Council 
as regards elements related to prospectuses and advertisements, OJ L 340, 19.12.2008, p. 17 
Commission Regulation (EC) No 1787/2006 of 4 December 2006, and Commission Decision (EC) No 
2006/891 of 4 December 2006 (the "Decision under the Transparency Directive"). 
Commission report of 6 July 2007 (COM(2007) 405 final 

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actual  progress  made  by  third  countries,  firstly,  on  their  convergence  programmes  and, 
secondly,  towards  eliminating  any  rules  on  reconciliation  requirements  that  apply  to 
Community issuers listed in the jurisdictions of these third countries.  

In  this  report,  the  Commission  provides  an  update  on  these  countries'  efforts  of  changeover 
towards IFRS. In doing so, the Commission requested the Committee of European Securities 
Regulators  (CESR)  to  provide  an  update  on  changeover  developments  towards  IFRS  in  the 
countries  that  recently  received  a  transitional  period  by  the  EU  (China,  Canada,  India,  and 
South Korea), e.g. by using public information or written information obtained from the third 
country regulators concerned. A particular focus was to be placed on the practical application 
of the substantially converged Chinese ASBEs on the basis of available reports. 

This  report  also  presents  recent  developments  in  countries  that  are  recognised  as  equivalent 
such  as  the  United  States,  and  Japan,  as  well  as  developments  in  several  other  major 
economies such as Argentina, Brazil, Mexico, Russia, and Taiwan. A number of jurisdictions, 
such  as  Australia,  Hong  Kong,  New  Zealand,  Singapore,  South  Africa,  have  already  fully 
adopted or implemented IFRS and therefore there is no need for a decision on equivalence by 
the European Commission. 

2. 

DEVELOPMENTS IN COUNTRIES THAT ARE RECOGNISED AS EQUIVALENT 

On 12 December 2008, the Commission adopted the Commission Decision9 and Commission 
Regulation10,  establishing  that  the  US  and  Japanese  GAAPs  are  equivalent  to  IFRS  for  use 
within the Community. This section presents developments in these countries during 2008-09 
based on publicly available information. 

USA 

Convergence 

In  2006  the  US  Financial  Accounting  Standards  Board  (FASB)  and  the  International 
Accounting  Standards  Board  (IASB)  concluded  a  Memorandum  of  Understanding  (MoU) 
which reaffirmed their objective for convergence between US GAAP and IFRS, and outlined 
the  work  programme  for  this  purpose.  CESR  confirmed  that  the  main  differences  which  it 
identified  in  its  advice  to  the  Commission  in  2005  have  been  addressed  by  both  boards.  A 
number  of  issues  (including  a  converged  standard  for  Business  Combination)  have  been 
completed, while others are ongoing and the target date of 2011 remains unchanged. 

On  the  political  level,  the  G20  conclusions  have  reaffirmed  a  commitment  to  international 
solutions, including in the accounting area. These commitments need to be transformed into 
specific policy decisions and the work towards convergence should be stepped-up at practical 
level, while maintaining the objective of achieving high quality financial reporting. In April 
2009 the IASB and the FASB updated their agendas, taking into account issues arising from 
the financial crisis. The focus of standard setting has to some extent been re-prioritised from 
convergence  towards  more  urgent  crisis-related  issues  which  has  caused  some  delay  in  the 
overall  convergence  process.  In  particular,  the  US  provisions  in  the  area  of  impairment  of 
available for sale debt instruments that were modified expeditiously as a response to the crisis, 
caused  additional  divergence  compared  to  the  related  IAS  39  standard.  The  IASB  and  the 
FASB are since then working on their respective revisions of accounting standards concerning 

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Commission Decision 2008/961/EC of 12 December 2008, OJ L 340, 19.12.2008, p. 112 
Commission Regulation (EC) No 1289/2008 of 12 December 2008, OJ L 340, 19.12.2008, p. 17 

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financial instruments and should find a convergent approach, but one that does not come at 
the expense of high quality financial reporting.  

Possible adoption of IFRS 

In  October  2008,  the  US  Securities  and  Exchange  Commission  (SEC)  issued  for  public 
consultation  a  proposed  Roadmap  for  transitioning  to  IFRS.  According  to  the  proposed 
Roadmap, which sets forth several milestones, the SEC would determine in 2011 whether to 
proceed  with  IFRS  adoption  by  2014.  The  deadline  for  comments  was  extended  from  19 
February to 20 April, 2009. 

In February 2010, the SEC unanimously approved a new timeline that envisions 2015 as the 
earliest possible date for the required use of IFRS by U.S. public companies. The SEC action 
calls  for  more  study  of  IFRS  and  a  decision  in  2011  on  whether  to  move  ahead  with  a 
mandate to use IFRS.  

Although the original road map would have allowed certain U.S. companies to use IFRS in 
2014, the SEC announced in February 2010 that it is not pursuing an early adoption option. 
The SEC could reconsider this position at a later date. The SEC statement also notes that it is 
not  foreclosing  the  possibility  in  the  future  that  US  issuers  may  be  permitted  to  choose 
between the use of IFRS or U.S. GAAP. 

The  European  Commission  considers  it  important  that  the  US  SEC  will  reach  a  positive 
decision  about  the  adoption  of  IFRS  as  soon  as  possible  in  2011.  In  the  absence  of  a  clear 
commitment to move towards adopting IFRS for US domestic issuers, both the credibility of 
the  IFRS  system  and  the  participation  of  non-implementing  countries  in  the  governance 
structure of the IFRS Foundation may be called into question. 

Reconciliation requirement 

In  November  2007,  the  SEC  decided  to  waive  the  requirement  to  reconcile  the  financial 
statements  of  foreign  issuers  to  US  GAAP  for  those  issuers  who  report  on  the  basis  of 
International  Financial  Reporting  Standards  (IFRS)  as  adopted  by  the  IASB.  The  SEC's 
decision contained a transitional derogation for those EU issuers using the EU's carve-out on 
hedge accounting [from IAS 39]. This transitional provision expired in November 2009. 

Japan 

Convergence 

Following the EU equivalence decision in 2008, the Japanese authorities continued the work 
on convergence between GAAP and IFRS. 

In October 2008 the Accounting Standards Board of Japan (ASBJ) issued two press releases 
regarding  measurement  of  fair  value  and  reclassification  of  debt  securities  as  a  reaction  to 
crisis-related  changes  developed  by  IASB,  e.g.  the  reclassification  of  some  financial 
instruments. 

In  March  2009  the  ASBJ  and  the  IASB  met  in  Tokyo  to  discuss  convergence  of  Japanese 
GAAP and IFRSs and reconfirmed the objective to achieve convergence of standards. 

In September 2009 the IASB and the ASBJ reaffirmed their ongoing cooperation in achieving 
convergence  in  accounting  standards.  Representatives  of  the  ASBJ  reported  that  progress  is 

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made  towards  convergence  of  IFRSs  and  Japanese  GAAP.  In  addition  to  responding  to  the 
IASB consultations, the ASBJ issued a revised Accounting Standard - ASBJ Statement No. 12 
(revised 2009) Accounting Standard for Quarterly Financial Reporting. The purpose of these 
amendments  is  to  revise  disclosure  requirements  for  quarterly  financial  reports  in  case  of 
doubts regarding the ability of "going concern." Furthermore, in response to the deliberations 
with  IASB, 
the  ASBJ  adopted  a  discussion  paper  on  "Accounting  for  Business 
Combinations,"  released  a  discussion  paper  on  "Provisions"  and  a  discussion  paper  on 
"Revenue Recognition."  

Possible adoption of IFRS 

Following the "Tokyo agreement",11 the Business Accounting Council (BAC)12, approved in 
June 2009 an Interim Report13 for the adoption of IFRSs in Japan.  According to the proposed 
interim report, voluntary use of IFRSs will be permitted from the fiscal year ending on or after 
March  31,  2010,  for  consolidated  financial  statements  of  certain  internationally  active  listed 
companies.  The  final  decision  regarding  the  mandatory  use  of  IFRS  would  be  made  around 
2012. A possible timing for the mandatory application of IFRS is 2015 or 2016.  

The  ASBJ  published  in  September  2009  an  update  of  their  project  plan  through  2011.  The 
renewed  project  plan  has  been  developed  taking  into  account  the  aforementioned  Interim 
Report  issued  by  the  BAC,  which  recommends  the  ASBJ  to  continue  and  accelerate  the 
convergence  of  accounting  standards.  It  also  takes  into  account  IASB’s  work  plan  from 
August 2009 to 2011. 

In December 2009, the Japanese Financial Services  Agency (JFSA) released the  revision of 
the  regulation  on  corporate  disclosure  which  enables  certain  Japanese  companies  to  apply 
IFRSs on a voluntary basis. 

During  early  2010  the  JFSA  consulted  publicly  on  the  revised  Regulatory  Notices  with  an 
intention  to  update  the  list  of  designated  IFRS  for  the  voluntary  application  in  Japan.  In 
March  2010,  the  JFSA  completed  the  public  consultation and updated the list  of designated 
IFRSs  allowing  all  IFRS  and  IFRIC  interpretations approved and issued by the IASB on or 
before December 31, 2009, to be used in the voluntary application of IFRS in Japan by certain 
Japanese  listed  companies  starting  from  the  consolidated  fiscal  years  ending  on  or  after  31 
March  2010.14  The  JFSA  also  announced  that  it  will  include  IFRS  9,  the  first  phase  of  the 
revision  of  IAS  39  undertaken  by  the  IASB,  in  a  package  to  be  available  for  use  by  some 
Japanese companies on a voluntary basis from 10 March 2010. 

The ASBJ published in April 2010 an updated version of the project plan through 2011 (see 
Annex).  The  ASBJ  still  plans  to  complete  the  items  related  to  the  remaining  differences 
between the existing Japanese GAAP and IFRSs in 2010, and intends to issue exposure drafts 
on most of the projects addressed in the MoU between the IASB and the US FASB in the first 
half of 2011 in line with the current IASB work plan.Reconciliation requirement 

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A joint declaration announced by the Accounting Standards Board of Japan (ASBJ) and IASB in 2007, 
which sets out an initiative to accelerate a convergence programme for IFRSs and Japanese GAAPs. 
An advisory body to the Japanese Financial Services Agency (FSA). 
BAC  (2009),  Opinion  on  the  Application  of  International  Financial  Reporting  Standards  (IFRS)  in 
Japan (Interim Report). 
http://www.fsa.go.jp/en/news/2010/20100303-1.html 

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The Japanese authorities do not require any reconciliation for EU issuers which prepare their 
financial statements using IFRS as adopted by the EU. 

3. 

CHINA 

In the case of China, the Commission requested CESR for advice on the practical application 
of the substantially converged ASBEs.  

The  Chinese  authorities  decided  in  February  2006  to  incorporate  IFRS  into  their  legislation 
whilst, in certain cases, making amendments to take into account local circumstances. These 
Accounting  Standards  for  Business  Enterprises  (ASBEs)  became  mandatory  for  all  listed 
Chinese enterprises from 1 January 2007.  

According to a report15 published by the Chinese Ministry of Finance in November 2008, the 
implementation  of  the  new  ASBEs  went  smoothly  and  has  been  achieved  without  major 
disruption  to  the  Chinese  markets  or  to  the  reporting  cycle.16  The  report  stated  that  the 
Chinese Ministry of Finance believes that the move to ASBEs has improved the quality and 
the  reliability  of  financial  reporting  in  China,  mainly  due  to  increased  transparency  of 
disclosures.  The  Ministry  also  believes  that  the  converged-ASBEs  are  both  making  the 
Chinese  market  more  attractive  to  overseas  issuers  and  putting  Chinese  issuers  in  a  better 
position to access international markets. Nevertheless, the Ministry of Finance has identified a 
number  of  areas  in  the  2007  financial  statements  where  the  level  of  compliance  could  be 
improved  or  where  it  was  felt  issuers  had  experienced  difficulties  in  identifying  acceptable 
applications under the standards concerned. Finally, the Ministry intends to take measures to 
improve the application of the new standards in future reporting periods.  

In September 2009, the Ministry of Finance issued an Exposure Draft (ED) on the “Roadmap 
for  Continuing  and  Full  Convergence”  of  Chinese  standards  with  IFRSs  for  public 
consultation. The comments were due by 30 November 2009.  

In its Report on the Observance of Standards and Codes (ROSC) of October 2009, the World 
Bank  commended  China  on  making  “impressive  progress”  in  establishing  an  institutional 
framework for accounting, auditing and corporate financial reporting.17 The report reiterates 
China’s commitment to convergence of Chinese ASBEs with IFRSs and points out that full 
convergence is expected to be achieved by 2012.  

The  Commission  will  continue  monitoring,  with  the  assistance  of  CESR,  the  practical 
implementation of IFRS in the future. 

4. 

CONVERGENCE WORK BY THIRD COUNTRIES INTENDING TO ADOPT IFRS 

In  February  2009,  the  Commission  requested  CESR  to  provide  an  update  on  progress  of 
certain third countries (Canada, South Korea, and India) that received a transitional period by 

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Chinese  Ministry  of  Finance  (2008),  Analysis  Report  on  the  Implementation  of  New  Accounting 
Standards by Chinese Listed Companies in 2007. 
The Chinese Ministry of Finance confirmed to the European Commission that this was also the case for 
the 2008 annual reports.  
Report  on  the  Observance  of  Standards  and  Codes  (ROSC)  –  Accounting  and  Auditing  –  People's 
Republic of China (see http://www.worldbank.org/ifa/rosc_aa_chn.pdf). 

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the EU in their changeover to IFRS. Further to CESR's report18 of June 2009, the Commission 
services are reporting the following: 

Canada 

In January 2006, the Canadian Accounting Standards Board (AcSB) announced its decision to 
fully  adopt  IFRS  for  publicly  accountable  enterprises  by  31  December  2011,  and  there  was 
publicly  available  information  giving  details  of  both  the  program  and  the  progress  the 
Canadian Authorities made towards achieving it.  

During  the  last  two  years,  the  Canadian  Authorities  have  continued  their  efforts  to  secure  a 
timely transition to IFRS through various publications, on-line training courses, and concept 
papers.  For  instance,  the  AcSB  published  in  November  2008  the  list  of  IFRSs  that  are 
expected  to  apply  to  Canadian  issuers  at  the  changeover  date  in  2011.  More  recently,  in 
March  2009  the  AcSB  released  the  second  omnibus  Exposure  Draft  (ED)  on  the  status  of 
Canada's transition to IFRS entitled "Adopting IFRSs in Canada II." The Canadian Institute of 
Chartered  Accountants  (CICA)  also  launched  a  free  on-line  course  on  the  introduction  to 
IFRS and implications for Canadian business.  
Finally, the Chairman of AcSB published a statement19in December 2008 confirming that the 
adoption plan was still on target and that neither the effects of market turmoil nor the SEC’s 
possible decision to delay the adoption of IFRS  in the US were going to delay transition in 
Canada.  

South Korea 

The Korean Financial Supervisory Commission (KFSC) and the Korean Accounting Institute 
(KAI) had made a public commitment in March 2007 to adopt IFRS by 31 December 2011, 
and  there  was  publicly  available  information  giving  details  of  both  the  program  and  the 
progress the South Korean authorities had made towards achieving it.  

During the last two years, the aforementioned South Korean authorities have continued their 
efforts  to  secure  a  timely  transition  to  IFRS  through  various  publications,  websites, 
regulations, and the establishment of a task force and an advisory group. For instance, during 
2008  KAI  published  a  full  set  of  K-IFRSs,  and  started  a  program  of  courses  aimed  at 
educating CPAs and accounting staff within companies. Furthermore, the KFSC has assured 
CESR  that  it  has  reviewed  and  amended  several  laws  and  regulations  to  align  these  with 
IFRS;  it  launched  a  website  to  disseminate  information  on  IFRS;  it  published  a  regulation 
mandating  companies  to  disclose  an  IFRS  impact  analysis  in  their  financial  statements  two 
years before they adopt IFRS; and established an advisory group for early adopters, and a task 
force to monitor progress made in implementing the roadmap. 

India 

In  July  2007,  the  Institute  of  Chartered  Accountants  in  India  (ICAI)  had  made  a  public 
commitment  to  adopt  IFRS  by  31  December  2011.  The  Indian  Government  had  confirmed 
publicly in May 2008 its intention to achieve convergence with IFRS by 2011. The ICAI had 
noted  that  it  might  make  modifications  (such  as  requiring  additional  disclosures,  changing 

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19 

In  its  report  of  June  2009,  CESR  clearly  stated  that  their  information  is  based  on  meetings  with  the 
IASB;  an  exchange  of  written  communication  with  a  representative  of  each  of  the  relevant  securities 
regulators  or  accounting  standards  setters,  and  publicly  available 
information  on  websites. 
Consequently, their report is factual in nature, and does not seek to opine on the progress with regards 
to convergence or adoption achieved within the countries concerned.  
See http://www.acsbcanada.org/fyi-newsletter/item17751.pdf 

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some  terminology  or  omitting  some  options  or  alternative  treatments)  to  IFRSs  in  order  to 
reflect particular Indian circumstances. These changes, however, were expected to be minor 
and  the  stated  intention  of  both  the  ICAI  and  the  Indian  Government  was  that  Indian 
Accounting Standards would be fully IFRS compliant by the end of the program. 

During  the  last  two  years,  the  Indian  Authorities  have  continued  their  efforts  to  secure  a 
timely  transition  to  IFRS  through  various  publications,  training  courses,  and  seminars.  For 
instance,  ICAI  is  currently  in  the  process  of  modifying  Indian  Accounting  Standards  to  the 
extent necessary to converge fully with IFRS, and has published a detailed work programme. 
It  has  also  launched  a  certificate  course  on  IFRS  to  enhance  the  IFRS  knowledge  to  its 
members. 

In  February  2010,  the  Ministry  of  Corporate  Affairs  of  India  adopted  a  plan  for  a  phased 
transition  to  "notified  Indian  standards  that  have  been  converged  with  IFRS"  by  listed  and 
large Indian companies20, other than banks and insurance companies: 
–  In  Phase  I,  some  specific  companies21  will  convert  their  opening  balance  sheets  as  of  1 

April 2011 (if the financial year commences on or after that date). 

–  In Phase II, companies, whether listed or not, having a net worth exceeding Rs 500 crores 
but not exceeding Rs 1000 crores22 will convert their opening balance sheet as of 1 April 
2013 (if the financial year commences on or after that date).  

–  In Phase III, listed companies which have a net worth of Rs 500 crores or less will convert 
their opening balance sheet as of 1 April 2014 (if the financial year commences on or after 
that date, whichever is later). 

Companies in the following categories will not be required to follow the notified accounting 
standards which are converged with the IFRS (though they may voluntarily opt to do so) but 
need to follow only the 'notified accounting standards that are not converged with the IFRS': 

–  Non-listed companies with a net worth of Rs 500 crores or less and whose shares or other 

securities are not listed on Stock Exchanges outside India  

–  Small and Medium Companies (SMCs). 

A separate roadmap for banking and insurance companies is expected to be submitted by the 
end of February 2010.  

5. 

DEVELOPMENTS IN OTHER THIRD COUNTRIES 

In addition to the countries already discussed in the previous sections, there are several other 
major economies moving towards IFRS. This section provides general information on recent 
developments  in  some  other  major  economies  that  the  European  Commission  is  aware  of 
based on publicly available information. 

20 
21 

22 

http://www.pib.nic.in/release/release.asp?relid=57220.  
Companies  that  are  part  of  NSE  Index  –  Nifty  50,  companies  that  are  part  of  the  BSE  Sensex  30, 
companies  whose  shares  or  other  securities  are  listed  on  stock  exchanges  outside  India,  companies, 
whether listed or not, which have a net worth of more than Rs 1000 crores. 
1 crore= 10 million. Rs (rupies) 500 crore= €80,000,000. Rs 1000 crore= €160,000,000. 

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Argentina 

In  December  2009,  Argentina's  National  Securities  Commission  (CMV)  adopted  a 
requirement that all companies that publicly offer equity or debt securities must prepare their 
financial statements using IFRSs, beginning with financial statements for the year endind 31 
December 2012. Companies may voluntarily file their financial statements in accordance with 
IFRSs starting in January 2011.  

Brazil 

In  July  2007,  the  Brazilian  Central  Bank  and  the  Brazilian  Securities  and  Exchange 
Commission (CVM) defined 2010 as the deadline for adoption of IFRS for the consolidated 
financial  statements  of  listed  companies  and  financial  institutions.  The  use  of  IFRSs  was 
optional for listed companies from 2007 through 2009. 

Mexico 

In November 2008, the Mexican Securities and Banking Commission (CNBV), together with 
the Mexican Accounting Standards Board (CINIF), announced that Mexico would adopt IFRS 
for all listed entities in 2012. Early adoption for some entities would be permitted from 2008 
subject to requirements that will be established by the CNBV. 

Russia 

In Russia, the government announced in 2002 that all companies and banks will be required to 
prepare their financial statements according to IFRS starting from 1 January 2004. Parallel to 
this,  there  is  a  continued  technical  approximation  of  Russia's  national  accounting  standards 
(RAS)  with  IFRS.  A  legal  proposal  requiring  corporations  to  conform  to  IFRS  has  been 
pending in the Parliament since 2004. There is no indication of any substantial development 
as far as mandatory use of IFRS is concerned.  

Taiwan 

In May 2009, the Financial Supervisory Commission (FSC) of Taiwan announced its roadmap 
for the full adoption of IFRSs in Taiwan. Phase I companies, which are all listed companies 
and  financial  institutions  supervised  by  the  Financial  Supervisory  Commission  (except  for 
credit cooperatives, credit card companies, and insurance intermediaries), will be required to 
apply  IFRSs  starting  from  1  January  2013.  Voluntary  adoption  of  IFRSs  will  be  permitted 
starting from 1 January 2012 for all listed companies. Phase II companies, which are unlisted 
public  companies,  credit  cooperatives  and  credit  card  companies,  will  be  required  to  apply 
IFRS starting from 1 January 2015 (optional starting from 1 January 2013). 

CONCLUSIONS 

6. 
Following the adoption of two Commission measures in December 200823, the Commission 
has  requested  CESR  to  provide  an  update  on  developments  in  the  four  countries  that  were 
found  equivalent  to  IFRS  on  a  temporary  basis  until  31  December  2011:  China,  Canada, 
India, and South Korea. CESR's work indicates that in all cases, the countries concerned have 
made some progress in pursuing their convergence or adoption programmes.  
With  regard  to  the  United  States  and  Japan,  the  Commission  has  already  recognised  their 
GAAPs as equivalent to IFRS for use within the Community. The US has conducted a public 
consultation on  the  adoption of IFRS, and concluded that it will take a decision in 2011 on 
whether to move ahead with mandatory use of IFRS. The US has also stated that it envisions 
2015 as the earliest possible date for mandatory application of IFRS. Therefore, the decision 

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in  2011  will  be  a  critical  one  as  far  as  convergence  between  US  GAAP  and  IFRS  is 
concerned. In the absence of a clear commitment to move towards adopting IFRS in the US, 
both the credibility of the IFRS system and the participation of non-implementing countries in 
the governance structure of the IFRS Foundation may be called into question. Japan has also 
continued  the  work  on  convergence  between  GAAP  and  IFRS.  Japan  allows  for  voluntary 
application  of  IFRS  by  certain  listed  companies  starting  from  the  consolidated  fiscal  years 
ending on or after 31 March 2010. Japan has also announced its intention to take a decision 
around 2012 on whether to adopt IFRS by 2015 or 2016. 

Other major economies have also recently announced their intention to adopt IFRS, such as 
Argentina,  Brazil,  Mexico,  and  Taiwan.  In  Russia,  there  are  no  indications  of  substantial 
development as far as mandatory use of IFRS is concerned. 

In  the  coming  years  the  Commission  will  continue  to  monitor  the  situation  and  assess  the 
ongoing  efforts  by  third  countries  converging  to  IFRS  or  intending  to  adopt  IFRS,  with  the 
technical assistance of CESR. 

The  Commission  will  continue  to  support  the  efforts  of  those  countries  which  have 
undertaken to converge their accounting standards to IFRS and also of those countries which 
have undertaken to adopt IFRS. 

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ANNEX to the  

Report on convergence between International Financial Reporting Standards (IFRS) and third 
country national Generally Accepted Accounting Principles (GAAPs)  

Annex 1: Brief up-to-date situation of some third countries convergence or adoption of IFRS 

Country 

Remarks 

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USA 

Japan 

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China 

Canada 

Since  1  January  2009,  the  EC  recognises  US  GAAP  equivalent  to 
IFRS for use within the Community.  

Following  a  public  consultation  on  the  roadmap  for  transitioning  to 
IFRS,  the  SEC  concluded  that  it  will  take  a  decision  in  2011  on 
whether to move ahead with adoption of IFRS. The US has also stated 
that  it  envisions  2015  as  the  earliest  possible  date  for  mandatory 
application of IFRS.  

Since 1 January 2009, the EC recognises Japanese GAAP equivalent 
to IFRS for use within the Community. 

Japan  announced  its  intention  to  decide  around  2012  whether  to 
impose mandatory application of IFRS by 2015 or 2016. Japan allows 
for  voluntary  application  of  IFRS  by  certain  listed  companies  starting 
from the consolidated fiscal years ending on or after 31 March 2010. 

Since  1  January  2009,  the  EC  accepted  financial  statements  using 
Chinese GAAPs on a temporary basis until 31 December 2011. 

Chinese authorities work towards full convergence by 2012. 

EC  accepted  financial  statements  using  Canadian  GAAPs  on  a 
temporary basis until 31 December 2011. 

Canada plans to fully adopt IFRSs in 2011.  

South Korea 

EC  accepted  financial  statements  using  South  Korean  GAAPs  on  a 
temporary basis until 31 December 2011. 

South Korea announced a plan to adopt IFRSs in 2011. 

India 

EC accepted financial statements using Indian GAAPs on a temporary 
basis until 31 December 2011. 

India announced a plan to adopt IFRSs in 2011. 

Argentina 

Argentina  plans  to  adopt  IFRS  in  2012  (optional  starting  in  January 
2011) 

Brazil 

Mexico 

Russia  

Taiwan 

Brazil plans to adopt IFRS in 2010 (optional for listed companies prior 
to 2010). 

Mexico  announced  that  all  listed  companies  will  be  required  to  use 
IFRS  by  2012  (early  adoption  for  some  entities  would  be  permitted 
from 2008 subject to certain requirements). 

No  indication  of  any  substantial  developments  on  convergence  to 
IFRS. 

Taiwan  announced  that  all  listed  companies  and  financial  institutions 
supervised  by  FSC  will  be  required  to  apply  IFRS  starting  from  1 
January 2013 (voluntary use for all listed companies will be permitted 
starting  from  1  January  2012).  Unlisted  public  companies,  credit 
cooperatives and credit card companies will be required to apply IFRS 
starting from  1 January 2015 (voluntary use  will be permitted starting 
from 1 January 2013). 

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